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Operators in Nigerian Aviation cry out over exchange rate, 7.5% VAT suspension

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Aviation industry
A few number of operators in Nigerian Aviation have reacted to the federal government’s suspension of 7.5 percent Value Added Tax (VAT) on airfares and other air transport services.

They also spoke on the unstable exchange rate between the foreign currencies and naira, saying that it has been an encumbrance to operations of the airlines.

Speaking about the development, the managing director, Aero Mainstream Cargo Services, Ajibade Adewale, said: “Operations of the airlines are largely dollar-denominated. Operations like aircraft purchase plus maintenance and training of staff amongst others can only be done in dollars.

“The only thing they do in local currency would be salaries. Either airlines are allowed to access stable rates or the federal government creates an enabling environment for aircrafts maintenance or repairs here.

“The rubber industry should be revived for investors to set up tyre manufacturing factories in Nigeria, in order to stop importing aircrafts tyres from other parts of the world. 

“Most of the aircraft tyres are manufactured and imported from the United Kingdom (Dunlop), France (Michelin), United States of America (Goodyear), and Bridgestone (Japan).”

Capt. David Olubadewo, Managing Director, Starburst Aviation Limited and a Nigerian based in the UK, however, called on the federal government on creating an enabling environment, especially for the maintenance aircrafts.

Olubadewo explained that aviation in Nigeria is a very difficult business because the environment is unfriendly.

According to him, “Aside from the role of the government, the industry has always been given a bad name in that light.

“It is not that we don’t have the people to fix it, but there are different aspects that have been compounded over the years. That is why we are where we are today.

“We have lots of very qualified people, there are lots of engineers in the United Kingdom and the United States who are Nigerians. We have people that are overqualified, but we lack the skills to execute the right policies to grow the sector.”

He added that most of the airlines and other industry stakeholders could not access cheaper loans because banks believe that the sector is too difficult to invest in.

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Olubadewo said: “But that is wrong. It is not different from other sectors. We are all in it to make profit at the end of the day.

“I don’t obtain loans from Nigerian banks, because I will end up with -25% loss or more, but that is not happening in the UK where I pay far less interest rate.

“If I take such loan in Nigeria, it means I am -28 per cent (interest rate) in red, and by the time you get to the top, you are owing millions.

“I cannot approach any of the banks to give me local money to do business in Nigeria. If I can go through that, you can imagine the experiences of the airlines.”

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